Surge in fresh fruit and vegetable prices help push up annual inflation

Jason Wiebe, president of Chongos's Market in the Crossroads Market poses with some of the imported produce that has recently seen large price increases in Calgary, on Friday January 22, 2016. Mike Drew / Calgary Sun

The $14.95 price tag for a bag of grapefruit stopped Sheri Paolatto in her tracks Friday at the Crossroads Market.

“I’ve never seen it that high. It’s usually $6.99, maybe $8 but that seems like quite a jump.”

Grapefruit isn’t the only produce to soar in price as fresh fruit has increased by 12.4 per cent since December 2014, and fresh vegetables are up 14.4 per cent, according to data from Statistics Canada released Friday. Led by those surging produce prices, Alberta’s annual inflation rate rose last month by 1.5 per cent, year over year.

The high prices are a direct result of adverse weather in the United States and the lower Canadian dollar since most produce is imported, said Jason Wiebe, president of Chongo’s Market at the Crossroads Farmers Market.

“Tomatoes trade the same as the TSX. It’s a commodity, too, and all produce is traded in U.S. dollars. In November, the retail cost of tomatoes on the vine was $1.99 a pound. Now I have to sell the same box at $3.99 pound.

“What’s going to be really interesting going forward is what happens to local growers come summer. With the dollar, they can make one and half or two times as much exporting than selling here.”

And that may only be the beginning of higher food costs, according to ATB chief economist Todd Hirsh.

“Going forward I think we’ll see even higher upward pressure on imported fruits and vegetables. If not for weather conditions, certainly that low Canadian dollar will affect it. Because the numbers we’re talking about today are from December and now in January we’re almost five to six per cent lower on that dollar….If people insist on eating fresh tomatoes and pineapple in January, they’ll be forced to pay for it.”

The price increases didn’t scare off Paolatto from buying her produce at Chongo’s Market. “I don’t mind paying for fresh fruits and vegetables, that’s why I come here. Being from Ontario it amazes me that fruits and vegetables come from another place. You have to pay for that.”

But both Hirsh and Wiebe expect some change in customers’ buying habits.

“What we’re already seeing is people are finding substitutions or ways to reduce purchases without, in a dramatic way, changing our lifestyle,” said Hirsh. “When people see sticker shock, I think they’ll find alternatives.”

Wiebe has seen it firsthand. “We have a lot more root vegetables being bought. The things that are local and haven’t been impacted by the low dollar, people are making those switch decisions. They’re buying potatoes and carrots instead of guava and mango.”

On top of higher produce prices, Albertans were also paying considerably more for home and mortgage insurance (15.4 per cent rise), cigarettes (15.9 per cent), and Internet access service (10.6 per cent) compared to a year earlier, the Stats Can report said.

That was offset by lower prices for fuel and utilities. Natural gas decreased 14.5 per cent, electricity dropped by 10.5 per cent, and gasoline was down seven percent compared to December 2014. Some Calgary service stations are now posting prices as low as 72.9 cents/litre.

Hirsh predicts we may see decreases going forward in electronics or transportation.

“We could see some nice price wars among air carriers in the spring. In Calgary, business travel is down so they might go after tourism travel.”

But moving forward, National Bank senior economist Matthieu Arseneau predicts shoppers will continue to face higher prices for imported goods in many categories.

“Despite weak energy prices, we don’t expect Canadian consumers to get some respite because the dive in the currency should be a significant offset,” Arseneau wrote in a note to clients.

By region, Statistics Canada found that consumer prices increased in every province last month compared to the year before, with British Columbia seeing the largest gain.

The core inflation rate, which excludes some volatile items such as gasoline, was up 1.9 per cent last month, slipping below the two per cent mark for the first time since July 2014. The core rate is followed closely by the Bank of Canada.

Statistics Canada also released its year-end review for 2015, which showed the country’s annual average increase in inflation was 1.1 per cent. Core inflation had an annual average increase of 2.2 per cent last year, reaching its highest level in a year-end review since 2003.

Statistics Canada also released data Friday that contained promising numbers for the state of the economy: retail sales were up 1.7 per cent in November compared to the previous month.

The increase came during a month that featured Black Friday promotions and a boost in sales at new car dealerships. They both helped push the total retail sales figure up to $44.3 billion.

By comparison, retail sales only rose 0.1 per cent in October and contracted by 0.3 per cent in September.

“We’ve been looking at an economy that’s kind of been limping along through September and October,” Dawn Desjardins, deputy chief economist for RBC said before pointing to other positive economic numbers that have been released for November, such as manufacturing sales and wholesale trade.

“I think it’s very encouraging that we saw such an increase in activity.”

This Week's Flyers

Comments

We encourage all readers to share their views on our articles and blog posts. We are committed to maintaining a lively but civil forum for discussion, so we ask you to avoid personal attacks, and please keep your comments relevant and respectful. If you encounter a comment that is abusive, click the "X" in the upper right corner of the comment box to report spam or abuse. We are using Facebook commenting. Visit our FAQ page for more information.